Independent Contractors frequently assume that they have signed employment contracts as Employees when in fact, they have signed Independent Contractor agreements with the company. Employers must pay particular attention to the very important differences and ensure that they employ through the correct avenues and apply the correct legal principles.

There are many instances whereby employment contracts may be disguised as independent contracts to avoid or bypass the procedural requirements when terminating employment.  In some cases, employers are not even aware of when a person is an employee or an independent contractor placing the employer at immense risk when deciding to terminate.

What are the differences between an Employee and an Independent Contractor and the recourse and protection each has?

If any one of the following criteria listed in Section 200A of the LRA is applicable to you, then you will be presumed to be an employee if:

• The manner in which the person works or his/her hours of work is/are subject to the direction or control of another person.
• The person forms part of the organisation.
• The person has worked for the other person for an average of at least 40 hours per month for the last three months.
• The person is economically dependent on the other person.
• The person is provided with tools of the trade by the other person; and
• The person only provides services to one person.

Section 213 of the LRA also defines an employee as:

“(a) any person, excluding an independent contractor, who works for another person or for the State and who receives, or is entitled to receive, any remuneration; and

(b) any other person who in any manner assists in carrying on or conducting the business of the employer”.

Independent Contractors on the other hand provide a service and are paid to render a particular service. An Independent Contractor is not subject to the control or direction of the company or person, which would be called its client.  Independent Contractors would normally invoice for work done and provide their own “tools of the trade’ , workforce and so on. 

Our Courts have developed a test called the “dominant impression test” to determine whether and employee is an independent contractor or an employee, these principles were accepted in the LAC matter SABC vs McKenzie.  

The principles of the test in short are:

• The object of the contract of service is the rendering of personal services by the employee to the employer. The services are the object of the contract. The object of the contract of work is the performance of a certain specified work or the production of a certain specified result.

• According to a contract of service the employee will typically be at the beck and call of the employer to render his personal services at the behest of the employer. The independent contractor, by way of contrast, is not obliged to perform the work himself or to produce the result himself, unless otherwise agreed upon.

• Employees are required to render services in terms of a contract of employment and are at the disposal of the employer.  The independent contractor is bound to perform a certain specified work or produce a certain specified result within a time fixed by the contract of work or within a reasonable time where no time has been specified.

• The employee is subordinate to the will of the employer, under its control. He is obliged to obey the lawful instructions of the employer who has the right of supervising and

controlling him by prescribing to him what work he must do as well as the manner in which it has to be done. The independent contractor is bound to produce in terms of his contract of work, not by the orders of the employer. He is not under the supervision or control of the employer.

• A contract of service is terminated by the death of the employee whereas the death of the parties to a contract of work does not necessarily terminate it.

• A contract of service terminates on expiration of the period of service entered into while a contract of work terminates on completion of the specified work or on production of the specified result.

It is best to always ensure that the differences are understood and correctly applied.  In the writers view proper advice should be obtained from an expert to ensure that the correct agreements are concluded in line with the work that is required.